Comprehensive Reforms in Improving the Investment Climate of Uzbekistan in 2017-2023
 

In the framework of improving the investment climate

a) 500 state functions aimed at regulating business were abolished, 70 of which were transferred to the private sector based on public-private partnerships and outsourcing. 132 types of licenses and permits were annulled, and a notification procedure was introduced for 33 types of activities. Most importantly, a comprehensive system for working with investors was implemented as part of these reforms. Dividends received by foreign investors from their shares were exempted from tax for three years, and the profit tax for them was reduced from 20% to 12%. A norm was adopted prohibiting the introduction of new or aggravating measures of responsibility in the Tax and Customs Codes.

b) The following important steps were taken to liberalize foreign trade. In particular, customs duties on more than 7,000 types of raw materials and goods necessary for investors were abolished. A simplified processing procedure was introduced in the customs territory. Work on joining the World Trade Organization was accelerated to bring the conditions of foreign trade and competition to a new level and to enter new markets. To attract foreign investments, 1,613 investment projects worth $26.6 billion were posted on the unified investment portal of Uzbekistan.
 

International Business Ratings

International ratings have become one of the main tools for assessing the effectiveness of reforms in countries, stimulating the creation of a competitive environment among them. In 2021, Uzbekistan was included for the first time in the OECD Regulatory Restrictiveness Index for Foreign Direct Investment (FDI).

The Republic of Uzbekistan entered the index ranking of 83 countries for the first time with a score of 0.068 (the average score of OECD member states is 0.064). According to this indicator, the Republic of Uzbekistan ranked 4th among CIS countries (after Georgia, Armenia, and Moldova) and 1st in the Central Asian region.
n 2023, the international rating agency "Fitch Ratings" assessed the sovereign credit rating of the Republic of Uzbekistan at BB- (stable). A stable growth rate of 5.7% is forecasted for 2024-2025.
he international rating agency "S&P" also assessed Uzbekistan's sovereign credit rating as "BB-" (stable). According to "S&P" calculations, in 2023, the government's liquid assets will amount to 16.7% of GDP, and used international reserves will be 29.9% of GDP.
ccording to the "S&P" forecast, real GDP growth due to domestic consumption and investment is expected to average 5.2% in 2023-2026.
 

Privileges and Preferences for Foreign Investors

a) Investors are guaranteed the free transfer of funds in foreign currency to/from the Republic of Uzbekistan, including currency exchange for repatriation, subject to the payment of taxes and fees. Also, after the completion of investment activities, a foreign investor has the right to repatriate their assets obtained as a result of the termination of investment activities in monetary or natural form without hindrance after fulfilling the foreign investor's obligations to the Republic of Uzbekistan and without causing harm to other creditors.

Legal entities created with the involvement of direct foreign investments and specializing in the production of goods (services) are provided with tax benefits in the form of exemption from land tax, property tax, and water use tax.
Entities attracting direct foreign investments are provided with the following tax benefits, the period of which varies depending on the amount of investment:
- From $300,000 to $3 million – for a period of 3 years;
- From $3 million to $10 million – for a period of 5 years;
- Over $10 million – for a period of 7 years.

b) The above tax benefits are provided without restrictions under the following conditions:
- Enterprises must specialize in the production of products or the provision of services/works in certain areas according to the approved list;
- Enterprises are located in any urban or rural settlements of Uzbekistan, except for the Tashkent region and the city of Tashkent (except for companies providing tourism services and waste processing services);
- The Republic of Uzbekistan does not provide sovereign guarantees for such foreign investments;
- The share of foreign participants in the authorized fund (authorized capital) of legal entities is at least 33%, and for joint-stock companies - at least 15%;
- Investments are made in foreign currency or in the form of new/modern technological equipment, and at least 50% of the corresponding tax benefits are reinvested for the further development of the enterprise.
Enterprises with direct foreign investments have the right to use other tax benefits provided by tax legislation.

c) For projects included in investment programs with a cost exceeding 200 billion soums (for the Republic of Karakalpakstan and the Khorezm region - 50 billion soums) where the share of own funds is at least 25%, connection to necessary engineering communications is carried out at the expense of the state budget.

Additional Measures Currently Being Implemented:
In collaboration with the International Financial Organization, draft laws are being developed in the following areas:
- "On Investments and Investment Activities" (new edition);
- "On Special Economic Zones" (new edition);
- "On Alternative Investments" (venture investments) to create favorable conditions for startup-innovative projects.

A working group has been formed from the relevant ministries and departments, and meetings are being held jointly with the secretariat of the Foreign Investors Council in the following areas:
- Development of the capital market, including turning it into an international financial center fully meeting the requirements of foreign investors;
- Wide implementation of the principles of ESG, aimed at ensuring responsible business conduct, economic stability, transparency, and openness;
- Development of a draft law on alternative (venture) investments to create favorable conditions for alternative investments and their promotion, including startups, innovative projects, joint investments;
- Digitalization of the system of working with investors, including the development of an excellent electronic platform for the implementation of all services between foreign investors and government agencies.

You can learn more about the comfortable conditions created in the country for investors from the infographic Invest in Uzbekistan